What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-12 compared with 2021-11-12 · 80 added, 165 removed, 93 unchanged (72% of the section changed)

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Such factors include, among others:

Our relationship with Emmis and Emmis Operating Company’s ability to effectively manage our operations;

Potential conflicts of interest with SG Broadcasting and our status as a “controlled company”;

Our ability to operate as a standalone public company and to execute on our business strategy;

Our ability to compete with, and integrate into our operations, new media channels, such as digital video, YouTube, and real-time media delivery;

Our ability to compete with, and integrate into our operations, new media channels, such as digital video, live video streaming, YouTube, and other real-time media delivery;

Our ability to continue to exchange advertising time for goods or services;

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regulatory requirements for owning and operating media broadcasting channels and our ability to maintain regulatory licenses granted by the FCC;

regulatory requirements for paying royalties to performing artists;

Industry and economic trends within the U.S.

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Other factors mentioned in documents filed by the Company with the Securities and Exchange Commission.

For a more detailed discussion of these and other risk factors, see the Risk Factors section of our Annual Report on Form 10-K and the Risk Factors included in Exhibit 99.1 on Form 8-K, filed with the Securities and Exchange Commission on March 30, 2021 and May 21, 2021, respectively .

For a more detailed discussion of these and other risk factors, see the Risk Factors section of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 24, 2022 .

MediaCo does not undertake any obligation to publicly update or revise any forward-looking statements because of new information, future events or otherwise.

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These rates are in large part based on our radio stations’ ability to attract audiences in demographic groups targeted by their advertisers and the number of persons exposed to our billboards.

The Nielsen Company generally measures radio station ratings weekly for markets measured by the Portable People Meter™, which includes all of our radio stations, while Geopath Insight Suite is the annual audience location measurement used for our billboards.

The Nielsen Company generally measures radio station ratings weekly for markets measured by the Portable People Meter™, which includes both of our radio stations, while Geopath Insight Suite is the annual audience location measurement used for our billboards.

Because audience ratings in a radio station’s local market are critical to the station’s financial success, our strategy is to use market research, advertising and promotion to attract and retain audiences in each station’s chosen demographic target group.

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In addition, it is our general policy not to preempt advertising spots paid for in cash with advertising spots paid for in trade.

The following table summarizes the sources of our revenues for the three and nine months end ed September 30 , 2020 and 2021 .

The category “Non Traditional” principally consists of ticket sales and sponsorships of events our stations conduct in their local market.

The following table summarizes the sources of our revenues for the three months end ed March 3 1 , 202 2 and 2021 .

The category “Non t raditional” principally consists of ticket sales and sponsorships of events our stations conduct in their local market.

The category “Other” includes, among other items, revenues related to network revenues , production of billboard advertisements and barter.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

(Amounts in thousands)

Revenue by Source:

For the Three Months Ended March 31,

(dollars in thousands)

Net revenues:

Radio Advertising

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These variable expenses primarily relate to costs in our sales department, such as salaries, commissions and bad debt.

Our costs that do not vary as much in relation to revenue are mostly in our programming and general and administrative departments, such as talent costs, ratings fees, rent, utilities and salaries.

Our costs that do not vary as much in relation to revenue are mostly in our programming and administrative departments, such as talent costs, ratings fees, rent, utilities and salaries.

Lastly, our costs that are highly discretionary are costs in our marketing and promotions department, which we primarily incur to maintain and/or increase our audience and market share.

KNOWN TRENDS AND UNCERTAINTIES

radio industry is a mature industry and its growth rate has stalled.

radio industry is a mature industry and its growth rate has slowed considerably.

Management believes this is principally the result of two factors:

(1) new media, such as various media distributed via the Internet, telecommunication companies and cable interconnects, as well as social networks, have gained advertising share against radio and other traditional media and created a proliferation of advertising inventory and (2) the fragmentation of the radio audience and time spent listening caused by satellite radio, audio streaming services and podcasts has led some investors and advertisers to conclude that the effectiveness of radio advertising has diminished.

Along with a large portion of the radio industry, our stations have deployed HD Radio ® .

(1) new media, such as various media distributed via the Internet, telecommunication companies and cable interconnects, as well as social networks, which have gained advertising share against radio and other traditional media and created a proliferation of advertising inventory and (2) the fragmentation of the radio audience and time spent listening caused by satellite radio, audio streaming services and podcasts has led some investors and advertisers to conclude that the effectiveness of radio advertising has diminished.

Along with the rest of the radio industry, our stations have deployed HD Radio®.

HD Radio offers listeners advantages over standard analog broadcasts, including improved sound quality and additional digital channels.

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The number of radio receivers incorporating HD Radio has increased in the past year, particularly in new automobiles.

It is unclear what impact HD Radio will have on the market in which we operate.

Our stations have also aggressively worked to harness the power of broadband and mobile media distribution in the development of emerging business opportunities by developing highly interactive websites with content that engages our listeners, deploying mobile applications and streaming our content, and harnessing the power of digital video on our websites and YouTube channels.

The results of our radio operations are solely dependent on the results of our stations in the New York market.

It is unclear what impact HD Radio will have on the markets in which we operate.

The results of our broadcast radio operations are solely dependent on the results of our stations in the New York market.

Some of our competitors that operate larger station clusters in the New York market are able to leverage their market share to extract a greater percentage of available advertising revenue through packaging a variety of advertising inventory at discounted unit rates.

Market revenues in New York as measured by Miller Kaplan Arase LLP (“Miller Kaplan”), an independent public accounting firm used by the radio industry to compile revenue information, were up 44.1% for the nine months ended September 30, 2021, as compared to the same period of the prior year.

During this period, as measured by Miller Kaplan, revenues for our stations were up 73.1%.

Our outperformance was largely driven by our largest outdoor concert, Summer Jam, which was held in August 2021.

Due to the pandemic, we cancelled the concert in 2020, so there are no comparative revenues in the prior year related to this event.

Market revenues in New York as measured by Miller Kaplan Arase LLP (“Miller Kaplan”), an independent public accounting firm used by the radio industry to compile revenue information, were up 25.4% for the three months ended March 31, 2022, but down 8.7% for the three months ended March 31, 2021, as compared to the same periods of the prior year.

During these periods, revenues for our New York cluster were up 24.1% and down 21.0%, respectively.

The increases in the three months ended March 31, 2022, as compared to the prior year were largely driven by overall advertising revenues rebounding from the COVID-19 pandemic, in particular sports betting and various state and local departments vaccination education and awareness campaigns.

Our stations benefited more than stations serving the general population due to the targeted nature of the awareness campaigns.

As part of our business strategy, we continually evaluate potential acquisitions of businesses that we believe hold promise for long-term appreciation in value and leverage our strengths.

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We also regularly review our portfolio of assets and may opportunistically dispose of or otherwise monetize assets when we believe it is appropriate to do so.

The Company has been actively monitoring the COVID-19 situation and its impact globally, as well as domestically and in the markets we serve.

Our priority has been the safety of our employees, as well as the informational needs of the communities that we serve.

Through the first few months of calendar 2020, the disease became widespread around the world, and on March 11, 2020, the World Health Organization declared a pandemic.

In an effort to mitigate the continued spread of COVID-19, many federal, state and local governments mandated various restrictions, including travel restrictions, restrictions on non-essential businesses and services, restrictions on public gatherings and quarantining of people who may have been exposed to the virus.

These restrictions, in turn, caused the United States economy to decline and businesses to cancel or reduce amounts spent on advertising, negatively impacting our advertising-based businesses.

While not a material amount, some of our advertisers experienced a material decline in their businesses and were not able to pay amounts owed to us when they came due.

Beginning in the first quarter of 2021, with the increased availability of vaccines, the U.S.

Throughout 2021 and into 2022, with the increased availability of vaccines, the U.S.

experienced an easing of restrictions on travel as well as social gatherings and business activities.

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If the spread of COVID-19 reaccelerates, or if supply chain disruptions persist, causing certain advertising categories (e.g., automotive dealers) to advertise less, we expect that our results of operations, financial condition and cash flows will continue to be negatively affected, the extent to which is difficult to estimate at this time.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are defined as those that encompass significant judgments and uncertainties, and potentially lead to materially different results under different assumptions and conditions.

We believe that our critical accounting policies are those described below.

Revenue Recognition

Broadcasting revenue is recognized as advertisements are aired and outdoor revenue is recognized over the life of the applicable lease of each billboard.

Both broadcasting revenue and outdoor advertising revenue recognition is subject to meeting certain conditions such as persuasive evidence that an arrangement exists and collection is reasonably assured.

These criteria are generally met at the time the advertisement is aired for broadcasting revenue or displayed for outdoor advertising revenue.

Broadcasting advertising revenues presented in the financial statements are reflected on a net basis, after the deduction of advertising agency fees, usually at a rate of 15% of gross revenues.

As of December 31, 2020 and September 30, 2021, we have recorded approximately $63.3 million in FCC licenses, which represents approximately 43% and 42% of our total assets, respectively.

We would not be able to operate our radio stations without the related FCC license for each property.

FCC licenses are renewed every eight years;

consequently, we continually monitor our stations’ compliance with the various regulatory requirements.

Historically, each of our FCC licenses has been renewed at the end of its respective period, and we expect that each FCC license will continue to be renewed in the future.

We consider our FCC licenses to be indefinite-lived intangibles.

We do not amortize indefinite-lived intangible assets, but rather test for impairment at least annually or more frequently if events or circumstances indicate that an asset may be impaired.

When evaluating our radio broadcasting licenses for impairment, the testing is performed at the unit of accounting level as determined by Accounting Standards Codification (“ASC”) Topic 350-30-35.

In our case, radio stations in a geographic market cluster are considered a single unit of accounting, provided that they are not being operated under a Local Marketing Agreement by another broadcaster.

Consequently, our two radio stations in New York are considered a single unit of accounting.

We perform the annual impairment test of our FCC Licenses as of October 1 of each year and perform additional interim impairment testing whenever triggering events suggest such testing is warranted.

Valuation of Indefinite-lived Broadcasting Licenses

Fair value of our FCC licenses is estimated to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

To determine the fair value of our FCC licenses, the Company considers both income and market valuation methods when it performs its impairment tests.

Under the income method, the Company projects cash flows that would be generated by its unit of accounting assuming the unit of accounting was commencing operations in its respective market at the beginning of the valuation period.

This cash flow stream is discounted to arrive at a value for the FCC license.

The Company assumes the competitive situation that exists in the unit of accounting’s market remains unchanged, with the exception that the unit of accounting commenced operations at the beginning of the valuation period.

In doing so, the Company extracts the value of going concern and any other assets acquired, and strictly values the FCC license.

Major assumptions involved in this analysis include market revenue, market revenue growth rates, unit of accounting audience share, unit of accounting revenue share and discount rate.

Each of these assumptions may change in the future based upon changes in general economic conditions, audience behavior, consummated transactions, and numerous other variables that may be beyond our control.

The projections incorporated into our license valuations take then current economic conditions into consideration.

Under the market method, the Company uses recent sales of comparable radio stations for which the sales value appeared to be concentrated entirely in the value of the license, to arrive at an indication of fair value.

Valuation of Goodwill

ASC Topic 350-20-35 requires the Company to test goodwill for impairment at least annually.

Under ASC 350 we have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform an annual quantitative goodwill impairment test.

Given the macroeconomic environment as a result of the COVID-19 pandemic, we have elected not to perform the qualitative assessment.

When performing a quantitative assessment for impairment, the Company uses a market approach to determine the fair value of the reporting unit.

Management determines the fair value for the reporting unit by multiplying the cash flows of the reporting unit by an estimated market multiple.

Management believes this methodology for valuing outdoor advertising businesses is a common approach and believes that the multiples used in the valuation are reasonable given our peer comparisons, analyst reports, and market transactions.

To corroborate the fair values determined using the market approach described above, management also uses an income approach, which is a discounted cash flow method to determine the fair value of the reporting unit.

If the carrying value of a reporting unit’s goodwill exceeds its fair value, the Company recognizes an impairment charge equal to the difference in the statement of operations.

All goodwill on the condensed consolidated balance sheets as of December 31, 2020 and September 30, 2021 is assigned to our Outdoor Advertising segment.

While the COVID-19 pandemic has negatively affected our outdoor operations, as of September 30, 2021, we don’t believe the long-term value of the outdoor business, and thus the associated goodwill, has been impaired.

The Company conducts its impairment test as of October 1 of each fiscal year, unless indications of impairment exist during an interim period.

Deferred Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequence of events that have been recognized in the Company’s financial statements or income tax returns.

Income taxes are recognized during the year in which the underlying transactions are reflected in the consolidated statements of operations.

Deferred taxes are provided for temporary differences between amounts of assets and liabilities recorded for financial reporting purposes as compared to amounts recorded for income tax purposes.

After determining the total amount of deferred tax assets, the Company determines whether it is more likely than not that some portion of the deferred tax assets will not be realized.

Results of Operations for the Three-Month and Nine-Month Periods Ended September 30, 2021 , Compared to September 30, 2020

CRITICAL ACCOUNTING ESTIMATES

Due to the COVID-19 pandemic, the global economy and financial markets have been disrupted and there is uncertainty about the length and severity of the consequences caused by the pandemic.

We have considered information available to us as of the date of issuance of these financial statements and are not aware of any specific events or circumstances that would require an update to our estimates or judgments, or a revision to the carrying value of our assets or liabilities.

Our estimates may change as new events occur and additional information becomes available.

Our actual results may differ materially from these estimates.

A complete description of our critical accounting estimates is contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on March 24, 2022.

RESULTS OF OPERATIONS

Three-Month Periods Ended March 31, 2022 compared to March 31, 2021

Net revenues:

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

(As reported, amounts in thousands)

Ended March 31,

(dollars in thousands)

Net revenues:

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Total net revenues

Net radio revenues increased for both the three-month and nine-month periods ended September 30, 2021, as a result of overall advertising revenues rebounding from the COVID-19 pandemic.

In addition, various state and local departments of health increased their advertising to drive education and awareness surrounding vaccination efforts.

Our stations benefited more than stations serving the general population due to the targeted nature of the awareness campaigns.

Also, during the third quarter of the current year, we held our annual outdoor concert, Summer Jam, which was cancelled in the second quarter of the prior year due to the COVID-19 pandemic.

Net radio revenues increased for the three-month period ended March 31, 2022, as a result of overall advertising revenues rebounding from the COVID-19 pandemic, in particular various state and local departments vaccination education and awareness campaigns and sports betting.

We typically monitor the performance of our stations against the aggregate performance of the market in which we operate based on reports for the period prepared by Miller Kaplan.

Miller Kaplan reports are generally prepared on a gross revenues basis and exclude revenues from barter and syndication arrangements.

Miller Kaplan reported gross revenues for the New York radio market increased 44.1% for the nine-month period ended September 30, 2021, as compared to the same period of the prior year.

Our gross revenues reported to Miller Kaplan were up 73.1% for the nine-month period ended September 30, 2021, as compared to the same period of the prior year.

Outdoor advertising revenues increased for the three-month and nine-month periods ended September 30, 2021, attributable to overall advertising revenues rebounding from the COVID-19 pandemic, which didn’t meaningfully impact our performance until the second quarter of 2020.

Miller Kaplan reported gross revenues for the New York radio market increased 25.4% for the three-month period ended March 31, 2022, as compared to the same period of the prior year.

Our gross revenues reported to Miller Kaplan were up 24.1% for the three-month period ended March 31, 2022, as compared to the same period of the prior year.

Outdoor advertising revenues increased for the three-month period ended March 31, 2022, attributable to overall advertising revenues rebounding from the COVID-19 pandemic.

Revenues in our outdoor advertising business have been less volatile than our radio business due to greater geographic diversification and longer duration advertising contracts with customers.

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For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

(As reported, amounts in thousands)

Ended March 31,

(dollars in thousands)

Operating expenses excluding depreciation and amortization expense

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Total operating expenses excluding depreciation and amortization expense

Radio operating expenses excluding depreciation and amortization expense increased during the three-month and nine-month periods ended September 30, 2021 due to expenses associated with Summer Jam, our largest outdoor concert held in August 2021, but cancelled in the second quarter of the prior year due to the COVID-19 pandemic.

Radio operating expenses excluding depreciation and amortization expense increased during the three-month period ended March 31, 2022 due to investment in our labor force with a higher focus on sales and digital as well as increases in costs that are commensurate with revenue.

Outdoor advertising operating expenses excluding depreciation and amortization are largely fixed in nature;

however, we recorded approximately $0.3 million and $0.6 million of employee retention credits in the three and nine-month periods ended September 30, 2021, respectively, which reduced operating expenses when compared to the three and nine-month periods ended September 30, 2020.

however, the increase in expenses primarily relates to two small acquisitions in the second quarter of 2021.

Corporate expenses

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

(As reported, amounts in thousands)

Ended March 31,

(dollars in thousands)

Corporate expenses

The increase in corporate expenses for both the three and nine-month periods ended September 30, 2021 relate to personnel hires in advance of the management agreement between the Company and Emmis ending in November 2021, as well as noncash compensation expense associated with restricted stock grants.

These increases were partially offset by approximately $0.1 million and $0.2 million of employee retention credits recorded in the three and nine-month periods ended September 30, 2021, respectively.

The increase in corporate expenses for the three-month period ended March 31, 2022 relates primarily to personnel costs associated with the build out of the corporate functions that were previously part of the management agreement between the Company and Emmis which ended in November 2021.

Depreciation and amortization:

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

(As reported, amounts in thousands)

Ended March 31,

(dollars in thousands)

Depreciation and amortization

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Radio depreciation and amortization expense decreased due to certain assets becoming fully depreciated in the prior year.

Outdoor advertising depreciation and amortization increased due to revisions to the preliminary purchase price allocation recorded during 2020 and associated adjustments to depreciation and amortization, coupled with depreciation expense associated with two small asset acquisitions that closed in the second quarter of the current year.

Outdoor advertising depreciation and amortization increased due to depreciation expense associated with two small asset acquisitions that closed in the second quarter of the prior year.

Loss (gain) on sale of assets:

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

(As reported, amounts in thousands)

Ended March 31,

(dollars in thousands)

Loss (gain) on sale of assets

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Total loss (gain) on sale of assets

The gain on sale of assets in the nine months ended September 30, 2021 principally relates to the disposal of certain outdoor advertising assets during the second quarter.

The loss on disposal of assets in the three and nine-month periods ended September 30, 2020 also relates to the disposal of certain outdoor advertising structures in the normal course of business.

The loss (gain) on sale of assets relates to the disposal of certain outdoor advertising structures in the normal course of business.

Operating (loss) income:

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

(As reported, amounts in thousands)

Ended March 31,

(dollars in thousands)

Operating (loss) income

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Total operating (loss) income

Radio and outdoor advertising operating income increased in the three and nine-month periods ended September 30, 2021, due to advertising revenues rebounding from the impact of the pandemic in the prior year.

In addition, for the three and nine-month periods ended September 30, 2021, the Company qualified for employee retention credits of $1.0 million and $1.9 million, respectively, and recorded the benefit as a reduction to operating expenses.

See “Net revenues,” “Operating expenses excluding depreciation and amortization,” and “Corporate expenses” above.

Interest expense

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

(As reported, amounts in thousands)

Ended March 31,

(dollars in thousands)

Interest expense

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4 to the senior credit facility.

Loss on debt extinguishment

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

(As reported, amounts in thousands)

Loss on debt extinguishment

The loss on debt extinguishment recorded during the nine months ended September 30, 3021 relates to the unscheduled principal payment of $3 million required under Amendment No.

4 to the senior credit facility.

In connection with this principal payment, we wrote-off a pro rata portion of the unamortized debt discount and recognized this as a loss on debt extinguishment.

(Benefit ) p rovision for income taxes:

P rovision for income taxes:

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

(As reported, amounts in thousands)

(Benefit) provision for income taxes

Given the uncertainty in the economy due to the ongoing COVID-19 pandemic, particularly in the New York market, the Company concluded it could not reasonably estimate pre-tax income for the year ended December 31, 2021, so the Company is calculating its provision for income taxes on a discrete basis until there is greater clarity.

During the three months ended June 30, 2020, the Company concluded that it was more likely than not that it would be unable to realize its deferred tax assets and recorded a valuation allowance against these assets.

Ended March 31,

(dollars in thousands)

Provision for income taxes

Our provision for income taxes tax is primarily due to the recognition of additional valuation allowance.

Consolidated net loss:

For the Three Months

Ended September 30,

For the Nine Months

Ended September 30,

(As reported, amounts in thousands)

Ended March 31,

(dollars in thousands)

Consolidated net loss

Net loss decreased for the three and nine-month periods ended September 30, 2021, primarily due to an increase in operating income and, in the case of the nine-month period, a decrease in provision for income taxes, partially offset by an increase in interest expense.

See “Net revenues,” “Operating expenses excluding depreciation and amortization,”, “Corporate expenses,” and “Interest expense” above.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2021, we had cash and cash equivalents of $7.4 million and net working capital of $5.9 million .

At December 31, 2020, we had cash and cash equivalents of $4.2 million and net working capital of $4.4 million.

The increase in net working capital is mostly due to an increase in cash and accounts receivable resulting from improved business operations.

The impact of this is partially offset by an increase in accrued interest due to the timing of annual interest paid in kind on the Emmis Convertible Promissory Note and the promissory notes due to SG Broadcasting.

Cash flows provided by operating activities were $4.2 million for the nine months ended September 30, 2021 versus cash flows used in operating activities of $7.2 million for the nine months ended September 30, 2020.

The increase was mainly attributable to an increase in operating income as we recover from the COVID-19 pandemic.

Cash flows used in investing activities were $1.3 million for the nine months ended September 30, 2021, attributable to the acquisition of billboard structures and routine capital expenditures, partially offset by the proceeds from the sale of certain outdoor advertising assets.

Cash flows used in investing activities were $0.3 million for the nine months ended September 30, 2020, attributable to capital expenditures.

Cash flows provided by financing activities were $0.3 million for the nine months ended September 30, 2021, due to debt proceeds of $4.0 million and proceeds from the issuance of Class A common stock of $0.2 million, net of debt payments and debt-related costs of $3.4 million and settlement of tax withholding obligations of $0.5 million.

Cash flows provided by financing activities were $12.2 million for the nine months ended September 30, 2020, due to $14.3 million of debt proceeds, partially offset by debt payments and debt-related costs of $2.1 million.

Our primary sources of liquidity are cash provided by operations, cash available through borrowings from Standard General, and sales of Class A common stock.

Our primary sources of liquidity are cash provided by operations, cash available through borrowings under the SG Broadcasting Promissory Note, and our At Market Issuance Sales Agreement.

Our primary uses of capital have been, and are expected to continue to be, capital expenditures, working capital, debt service requirements and acquisitions

The Company continually projects its anticipated cash needs, which include its operating needs, capital needs, and principal and interest payments on its indebtedness.

As of September 30, 2021, approximately 42% of our total assets consisted of FCC broadcast licenses, the values of which depend significantly upon various factors including, among other things, market revenues, market growth rates and the operational results of our businesses.

We would not be able to operate the properties without the related FCC license for each property.

FCC licenses are renewed every eight years;

consequently, we continually monitor our stations’ compliance with the various regulatory requirements.

Historically, substantially all FCC licenses have been renewed at or after the end of their respective periods, and we expect that our FCC licenses will be renewed in the future.

Regulatory, Legal and Other Matters

From time to time, our stations are parties to various legal proceedings arising in the ordinary course of business.

In the opinion of management of the Company, however, there are no legal proceedings pending against the Company that we believe are likely to have a material adverse effect on the Company.

Quantitative and Qualitative Disclosures About Market Risk

As an emerging growth company, we are not required to provide this information.

At March 31, 2022, we had cash and cash equivalents of $8.8 million and net working capital of $3.5 million .

At December 31, 2021, we had cash and cash equivalents of $6.1 million and net working capital of $7.7 million.

The decrease in net working capital is primarily due to an increase in accrued interest due to the timing of annual interest paid in kind on the Emmis Convertible Promissory Note and the promissory notes due to SG Broadcasting, an increase in the current portion of long-term debt, cash paid for capital expenditures, and cash paid for the settlement of tax withholding obligations.

At March 31, 2022, we had $68.5 million of borrowings outstanding under the Senior Credit Facility, of which $3.7 million is current.

The borrowing rate under our Senior Credit Facility was 9.5% at March 31, 2022.

Additionally, at March 31, 2022, we had $6.2 million and $27.6 million of promissory notes outstanding to Emmis and SG Broadcasting, respectively, all of which is classified as long-term.

The debt service requirements of MediaCo over the next twelve-month period are expected to be $10.4 million related to our Senior Credit Facility ($3.7 million of principal repayments and $6.7 million of interest payments).

The Senior Credit Facility bears interest at a variable rate.

The Company estimates interest payments by using the amounts outstanding as of March 31, 2022 and then-current interest rates.

There are no debt service requirements over the next twelve months for either the Emmis Convertible Promissory Note or the SG Broadcasting Promissory Note.

As part of our business strategy, we continually evaluate potential acquisitions of businesses that we believe hold promise for long-term appreciation in value and leverage our strengths.

However, our Senior Credit Facility substantially limits our ability to make acquisitions.

Cash flows provided by operating activities were $4.7 million and $0.6 million for the three months ended March 31, 2022, and 2021, respectively.

The increase was mainly attributable to significant collections in accounts receivable and increased revenues as we recover from the COVID-19 pandemic.

Cash flows used in investing activities were $0.8 million for the three months ended March 31, 2022, attributable to capital expenditures related to a new digital platform project.

Cash flows used in investing activities were $0.1 million for the three months ended March 31, 2021, attributable to capital expenditures, net of proceeds from the sale of property and equipment.

Cash flows used in financing activities were $1.2 million for the three months ended March 31, 2022, attributable to settlement of tax withholding obligations.

Cash flows used in financing activities were $0.2 million for the three months ended March 31, 2021, attributable to settlement of tax withholding obligations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis